The increased popularity and availability of e-commerce locations has led more and more consumers online and made online shopping second nature for most. Paired with lockdowns and restrictions imposed on retail locations during the Covid-19 pandemic, this has caused the demand for parcel deliveries to grow at an accelerated rate. At the same time, rising energy prices and inflation have caused a decrease in consumer confidence, making it all the more important for brands to focus on growing customer satisfaction.
In 2022, European e-commerce logistics market was valued at over €81 billion, a decline of 7.5% compared to 2021, but still ahead of the 2020 market value of €70 billion, with further growth projections of 5.3% in 2023 (Ti Insight). A growth of this extent, together with increased consumer and business focus on sustainability, has led all stakeholders to consider alternative delivery solutions.
While out-of-home delivery locations, such as Pick-up-Drop-off (PUDO) locations and parcel lockers, are not a recent innovation, they have recently been gaining popularity among businesses and consumers alike but are still to reach their full potential.
Delivery options: consumer readiness and perception
When looking at different delivery options, research by the International Post Corporation found the most used location was delivery at the door, used at least once in the past year by 88% of respondents. The following most used methods were delivery in the mailbox (78%), post office (55%), and postal service point (51%), while parcel lockers were used by less than half of the respondents (44%), even though they were the fourth most popular option when asked about consumer preferences.
While consumer readiness for out-of-home delivery options is high, their utilisation still has ways to go, due to low network density, sometimes high dwell times, and accessibility of other delivery options. “Exclusivity of PUDO locations creates a lack of network density – each carrier has their own locations, at different distances from consumers’ homes, which can make it time-consuming and inconvenient for the consumer,” explains Christian Grosse, Chief E-Delivery Product Officer at Maersk. “The more locations businesses can offer, and the more convenient those locations are for the consumer, the bigger the adoption rate will be.”
When it comes to parcel lockers, dwell time – the total time that a parcel is stored in a locker compartment from deployment until effective pick-up – is arguably the most important factor for parcel operators when considering parcel lockers (IPC). While parcel shops don’t face the same restrictions in the number of packages they can receive, their opening times play a significant role in the amount of time it will take for the consumer to pick up their parcel.
Enabling and encouraging sustainability
While 85% of postal operators set emissions targets for their operations (European Commission), online shoppers don’t seem to share their view if it comes with an additional cost. Up to 25% of consumers indicate interest in low-impact delivery options, but less than 10% are willing to pay an extra price or tax to compensate for the negative environmental impact of delivery (Oliver Wyman). Although emissions from physical shopping are, on average, 2.3 times greater than emissions from e-commerce, online retailers can help facilitate the shift to lower emission deliveries by implementing a couple of changes.
“By offering more out-of-home delivery options and locations closer to consumers’ homes, businesses can influence consumer behaviour and lead them to more sustainable decisions,” says Grosse.
Because carriers often charge lower rates for PUDO deliveries than they do for home deliveries, online retailers can pass on the saving to their customer, eliminating sustainability charges and making the option more attractive for end consumers. Out-of-home deliveries can be up to 5 times more efficient per route than home deliveries, reducing environmental impact of delivery by minimising total driving miles (Last Mile Experts). Research suggests that by 2032, shifting to 100% PUDO delivery, even without the utilisation of electric vehicles, would result in emission reduction of 103g of CO2 per parcel (Last Mile Experts). Combined with operational and financial efficiency, this can reflect positively on businesses’ emissions bottom line and further decarbonisation goals.
Giving consumers more control over how their parcels are delivered and to which locations not only increases customer satisfaction, but also decreases instances of contacting customer service about package delivery times and locations.
What you need to know before offering out-of-home delivery
Besides the network density, consumer readiness, and sustainability, other factors will influence the effectiveness of businesses’ out-of-home strategies.
“When introducing out of home delivery to their consumers, there are three consideration points for businesses – technology maturity, market focus, and partner selection,” says Christian Wirawan, Regional Product Team Lead at Maersk.
Technology maturity refers to the readiness and limitations of the technology used for checkout to serve out-of-home delivery locations. Checkout platforms can be simple solutions but can also limit the choice of last-mile delivery partners, as they also need to integrate with the platform.
When looking at market focus, businesses must understand the consumer and their interest in out-of-home deliveries, as well as determine the right partner who will help them reach those consumers. With partner selection, businesses should consider the network density of their partner’s locations, as well as compatibility of technology platforms.
Especially in existing markets, out-of-home locations can serve a dual purpose – for both inbound and outbound parcels. Similarly, to giving customers control over parcel pick-up locations, offering easy returns at convenient locations also improves the overall satisfaction and retention. Read more about how an effective returns policy can optimise your e-commerce supply chain here.
With the continuous rise of e-commerce across Europe and especially in emerging markets, out-of-home deliveries offer opportunities for additional growth by enabling flexibility and putting control in the hands of consumers.